Making Medical Devices Accessible: Are Price Caps Necessary?

31/05/2016 4:12 PM IST
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Updated
15/07/2016 8:27 AM IST

The US Food and Drug Administration (FDA) has defined a medical device as a healthcare product that does not achieve its purpose by chemical action or by being metabolized. This means that a vast number of products are considered medical devices. Such devices play an essential role in the practice of medicine.

The modern era of implantable medical devices is considered to have started in the 1920s with development of artificial hips. The implantable pacemaker was another milestone and pacemakers and cardioverters/defibrillators have since saved millions of lives and created commercial giants in the medical device industry. Medical device innovation has brought life-saving and life-changing outcomes for patients worldwide. However, while the developed world is benefitting from these devices, many people in developing and underdeveloped countries have experienced difficulties in even having access to them. Development and diffusion of innovative medical devices has slowed down for certain consumer products due to the barriers to innovation. Putting a price cap on medical equipment, as suggested by the Indian government, limits the avenues for growth, creating a confined environment for the med-tech sector to explore and innovate.

[I]f profits and margins to the innovators are restricted forcefully, there is reduction in innovation...

The sometimes excessive pricing of medical devices is probably unsustainable both in the rich and the low- income parts of the world, but the abundant availability of certain devices from a slew of competitive companies have led to drastic reduction in pricing. Also, focusing on limited, very good quality companies leads to bulk purchase of these stents and subsequent price reduction.

Medical device companies, which are doing high-risk businesses, deserve to be rewarded for their breakthroughs.

At our hospital, the lowest priced stents range from ₹20,000 onwards; a total all-inclusive package of USA-based drug eluting stent costs around ₹100,000 for a three-day stay; the most expensive stent is priced at ₹2,30,000.

At many hospitals, for non-USA FDA stents, the entire cost inclusive of hospitalization charges and procedure costs can range from ₹60,000 or less for the package. Evidently, the prices have already reduced by 50-70% over a decade which is remarkable in the context of annualized 10% inflationary rise in India over the last 10 years.

However, if profits and margins to the innovators are restricted forcefully, there is reduction in innovation and that leads to a loss of mission for many companies aiming to bring the best healthcare to humanity. Also, the introduction of too low a price always leads to under-invention.

Focusing on limited, very good quality companies leads to bulk purchase of these stents and subsequent price reduction.

It is time for the government, insurers, manufacturers and providers to embrace common objectives and to acknowledge and fully support the crucial role of medical technology assessment in the enhancement of the quality of healthcare and the discriminate and equitable use of scarce resources.

To ignore this need because of the management's preoccupation with numbers or reliance on cost choices with "price capping" would be shortsighted and an injustice to our society.

Innovation has been the lifeblood of many medical device manufacturers.

Over the long term, it's desirable to have the medical device industry be indigenously developed at a reduced cost. That, of course, is a decade-long transformational process where the Indian government would need to invest in developing an innovation-promoting ecosystem (which is what happened in the Indian IT industry over a three-decade journey).

Instead of price capping, the following features can be added to contain the cost of device delivery:

1. Streamlining of clinical testing, and educating doctors and hospitals to ensure right choice of device for the right patient and maximizing lower cost devices already available (where efficacy is equivalent to higher cost devices).

2. A more standardized approach to the health technology assessment process.

3. Appropriate utilization criteria to avoid unethical use. There is widespread belief that there is over-utilization of these devices which leads to cost escalation.

4. Removal of transaction costs.

5. Reduction or removal of taxation and duties.

6. Abolition of VAT charges.

7. Speed up introduction and diffusion of cost-effective devices leading to spontaneous price competition.

8. Demonstrating that a new medical device more quickly achieves treatment goals and lowers the overall cost of care. This will ensure maximum purchase consideration and pricing, which the hospitals and doctors are willing to convey to consumers.